Private Company Share Trading on a Global Platform- the New Black
In recent years, venture capital backed Unicorns (unlisted companies with a valuation over US$1bn) have exploded in both quantity and market capitalisation. According to Crunchbase.com there are currently 616 (including 3 Australian) Unicorns valued at almost US$2 trillion with a new Unicorn created every 4 days.
Meanwhile, the median age for companies listing via IPO on a public stock exchange, according to a report by Ernst & Young, has grown to 8-10 years and the COVID-19 disruption has seen a slowdown in IPO’s this year.
The IPO process has not always been favorable, for example Lyft, a one-time powerhouse in the private markets raised over US$5.1bn according to TechCrunch.com, however is now currently trading at US$68.17(1), almost half its IPO price. Coupled with the time-consuming pressure of an IPO, a Price Waterhouse Coopers report found that 83% of CFO’s surveyed spend in excess of US$1M on one-time IPO associated costs(2) and then there is the ongoing and burdensome regulatory costs and processes post IPO.
The wealth and value tied up in Unicorns coupled with the delays in a liquidity event have left founders, shareholders and employees searching for alternative liquidity solutions.
This result has seen the emergence of companies like PrimaryMarkets who offer, founders, shareholders and companies an alternative to going public through company sponsored Private Trading Hubs and a Secondary Trading Platform to buy and sell shares.
Investors now have an opportunity to gain access to fast growing private unlisted companies with significant wealth creation opportunities. For instance, Tyro Holdings, a payment network company, experienced growth accretion on the PrimaryMarkets Platform (refer graph below) driven in part by the direct visibility to PrimaryMarkets global network of over now 110,000 potential investors, including PE firms, family wealth offices and sophisticated investors.
Traditionally the fragmented and complex nature of the pre-IPO market has left little opportunity for investors to get involved with private companies and no real alternative for companies to delay going public. PrimaryMarkets provides companies with features such as:
- Dedicated and Private: Private Trading Hub – is a fully customised Platform accessible only to those the company allows
- Investor Resources: dedicated company information – financials, investor presentations, research notes
- Flexible Share Trading Rules: ensures adherence to all the trading rules advised by the company
- Transaction controls: timing, conditions of sale and access to the PrimaryMarkets Investor Network can be determined by the company
- Transparency: full management and monitoring of transactions
- Integrated processes for settlement and Share registration: full-service solution for the company and its securityholders
- PrimaryMarkets Escrow: online administration for KYC, AML, settlement and clearing
As the economic implications of COVID-19 play out over time it is likely we will continue to see more companies delay the IPO process and the need for liquidity among shareholders will become more important.
Additionally, the impact of low interest rates and the search for new capital growth opportunities for investors will continue to be an opportunity for both investors and companies in the unlisted space.
As a result, companies such as PrimaryMarkets which offers genuine alternatives to an IPO will become increasingly relevant as a genuine opportunity for companies and investors to secure liquidity.
- Share price as at 1st December 2020
- Source: PricewaterhouseCoopers (2018). Considering an IPO to fuel your company’s future? [online] PwC. Available at: https://www.pwc.com/us/en/services/deals/library/cost-of-an-ipo.html.